“A rose by any other name would smell as sweet.” A phrase popularized by William Shakespeare in his play Romeo and Juliet. This poem implies that things are what they are, no matter what name someone give them.

In procuring someone’s service, companies typically employ the persons to work for them under an employment agreement. Meanwhile, some companies often use alternative arrangement, such as partnership agreement, freelance agreement, or any other name to underlie the relationship between the companies and the persons providing the services. The aim is to emphasize that the status of these persons is partner or independent contractor, not employee. These persons are intended to be not entitled with the basic rights of the employee under Manpower Law,1 among others, minimum wage, annual leave, social security, and severance packages when it comes to the termination. Nevertheless, one may see this arrangement as a technique used by the companies to free themselves from employer’s obligations under Manpower Law.

This article examines to what extent the law considers partnership agreement implies an employment relationship, hence the partnership agreement is subject to Manpower Law.

Under Manpower Law, the elements of employment relationship are (i) work, (ii) salary, and (iii) instruction.2 These elements are the fundamental factors to determine the existence of employment relationship in an agreement regardless of the name. These element must be fulfilled cumulatively.

The first element is work. There must be a work that is agreed by the parties, and such work shall not violate the applicable laws, decency, and public order. Furthermore, Prof. Aloysius explains “work” as obligations that must be undertaken by the party performing the work. The work must be completed by himself and shall not be assigned to other party.3 Partnership agreement might fulfill this element as the subject matter of such agreement is typically a performance of certain service (work) by one party to the other party.

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The second element, salary, means there is a salary specified in the form of money as a reward from the employer to the employee which is stipulated and paid based on the agreement between the parties.4 With regards to the “salary” element, Supreme Court Decision No.: 1204K/Pdt.Sus-PHI/2017 essentially held that the relationship between the plaintiff and defendant is based on a partnership agreement where the honorarium is granted based on the revenue sharing from the completed trip, hence the relationship between the plaintiff and the defendant is not an employment agreement.5 There are others court decisions which held the similar legal consideration. Based on this jurisprudence, if the partnership agreement does not specify a fixed amount of salary paid in certain period, but specify some kind of revenue sharing, e.g. in ride-sharing app where the partner (i.e. the driver) earns revenue sharing from the fare paid by the passenger, then it can be an indication that the partnership agreement may not be seen as employment relationship.

The third element is instruction. The instruction indicates there is a subordinate relation between the parties (the employer and the worker).6 In practice, the “instruction” element is indicated by the rules of conduct (peraturan tata tertib) which must be adhered by the employees.7 With regards to this element, Supreme Court Decision No.: 346K/Pdt.Sus-PHI/2014 essentially held that the instruction element is not fulfilled since there is no sanction imposed for the plaintiff whenever he comes late.8 Using argumentum a contrario principle, if the partnership agreement stipulates sanction for the violation of the determined rule of conduct, e.g. a sanction of warning letter (surat peringatan) if the partner comes late to work, then it is might be indicated that such agreement implies an employment relationship.

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Based on the above analysis, an agreement underlies a relation between the company and person engaged to provide the service is considered to have an employment relation if it fulfills those 3 elements of employment regardless of what name was given to it.

For clarity, the partnership agreement must be properly drafted in order to distinguish themselves from an employment agreement. Although it is not absolute, there are some things to be taken into consideration when drafting a true partnership agreement.

First, the agreement is titled “partnership agreement” as it may serve as the first indication that this agreement is not intended to create employment relationship between the parties.

Second, the agreement stipulates a clause which essentially provides that the agreement does not constitute and shall not be construed as constituting an employer-employee relationship.

Third, the agreement does not contain a covenant by the company to enroll the “partner” in an insurance program provided by the company, nor a social security.

Kevin Samuel Fridolin Manogari

Sources

  1. Law No. 13 of 2003 on Employment as amended by Law No. 11 of 2020 on Job Creation
  2. Article 1 number (15) of Manpower Law
  3. Aloysius Uwiyono, dkk, “Asas-Asas Hukum Perburuhan”, PT RajaGrafindo Persada, Depok, 2014, hlm 61
  4. Article 1 number (30) of Manpower Law
  5. Supreme Court Decision No. 1204K/Pdt.Sus-PHI/2017
  6. Aloysius Uwiyono, dkk, “Asas-Asas Hukum Perburuhan”, PT RajaGrafindo Persada, Depok, 2014, hlm 59
  7. Adrian Sutedi, Hukum Perburuhan, Sinar Grafika, Jakarta, 2009, hlm 48
  8. Supreme Court Decision No.: 346K/Pdt.Sus-PHI/2014